Planning for the new normal

This has and will continue to be one of the most extraordinary events to impact on our business and personal lives, things will never be the same again. So much focus has been on handling the situation day by day that it seems as if the days and weeks have run into one – before we have realised it  – here we are in June! And so before we know it, the new normal will be upon us – take this time to plan and get ready to be up and running.

Here at CGA, the team continues to work from home and this will remain in place until early September.  The office continues to be closed to external visitors, although Claire and I (working from the office) have enjoyed the odd client (take that whichever way you want) carrying out a “knock and run” drop off of information (pre-planned of course) – accompanied by a distant wave.

For those of you that have visited our offices, you will know that we are lucky enough to have 3 meetings rooms in addition to our workspace and plenty of beautiful outside space. Our future plans include a re-designation of 2 of the meeting rooms into workspaces for the team and moving the furniture about to create one large meeting room at the end of the premises (we are keeping our comfy sofas). We intend to allow the team to continue to work from home on a temporary basis, sharing office working and home working to minimise the number of bodies in the office.

The office will remain closed to visitors until the new year and even then visits to the office will only be of an essential nature.

We like so many of our clients have become dab hands with various Meeting software Apps and these newfound skills will become part of everyday life. Terms such as Zoomdoom (the failing of the software at a critical meeting point),  Zoomroom (the area of your office/space visible to the camera which is always spotless despite the chaos of the rest of the area), Videobombing (that awkward moment when the kids wander into your video meeting) – we have already heard several such stories which we cannot repeat here!

We have new hand sanitising stations and lots of new signage and are currently in the process of upgrading our 16-year-old phone system so that all of the team are accessible with ease and calls can be quickly and efficiently answered and redirected. With only 2 of us in the office, it would appear that a telephone conspiracy is at work – 1 call sparks 3 others and the mobiles ring too!

We are hoping to qualify for a digital enterprise grant for some of the upgrade, don’t forget there is other support out there for businesses not just the support from the Government, many Business Representative Organisations and Trade Bodies are also useful support links.

We are very grateful to Bridge HR who have worked to help us prepare our Covid19 Office Policy, which not only provides legislative guidance but more importantly creates a practical common sense document that we can actually work with.

As the lockdown continues to ease we must all play our part to ensure that the safety and protection of those around us continues to be paramount – all it takes is a bit of planning and a lot of common sense!

COVID-19: Update to Coronavirus Job Retention Scheme

See our previous post for full details on original scheme

Closure of the first Furlough Scheme and the Opening of the Second Furlough Scheme
The full detail around the furlough schemes can be found below however it is very important that you understand and appreciate that the first furlough scheme will close on the 30th June and that in order to any employee or director to be furloughed as part of the second scheme – they must have already been furloughed as part of the first scheme.

It will not be possible to make a claim for a NEWLY furloughed employee/director from the 1st July.

This means that you have until the 10th June to take the opportunity of furloughing a member of staff (including directors) who has not previously been furloughed.  The minimum furlough period is 3 weeks.  The 10th June date provides enough time to qualify for the minimum furlough period prior to the closure of the first furlough scheme.
 

Second Scheme Headlines:

  • 10 June: last day an employer can put an employee onto furlough for the first time
  • 30 June: closure of the scheme to employers who have not already claimed
  • 1 July: employers given flexibility to bring employees back to work part-time whilst accessing CJRS for any of their normal hours not worked, starting so-called ‘flexible furloughing’
  • 31 July: end of current CJRS funding level (80% of salary up to £2,500 per month, plus employer NICs and auto-enrolment pension contributions funded)
  • 1 August onwards: CJRS funding remains at to 80% of salary/£2,500 per month but employers will be required to pick up the costs of the NICs and auto-enrolment pension contributions
  • 1 September onwards: CJRS funding reduces to 70% of salary/£2,187.50 per month.  As well as NICs and pension contributions, employers will be required to pick up 10% of salary costs
  • 1 October onwards: CJRS funding reduces to 60% of salary/£1,875 per month.  Employers will be required to pick up NICs, pension contributions and 20% of salary costs
  • 31 October: end of CJRS scheme
  • We are expecting more detailed information on the 12th of June.

Remember that employers will need to have an agreement with staff about flexible furlough arrangements.

Links

Chancellor Extends Furlough Scheme
Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
What work can I carry out as a furloughed Director?
Original Coronavirus Job Rention Scheme Details
Furlough Letter Template

[DOWNLOAD] COVID-19: Self-employment Income Support Scheme

Updated 4th June 2020 11am:

The Self-Employment Income Support Scheme will be extended – with those eligible able to claim a second and final grant capped at £6,570.  The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

If you’re eligible and want to claim the first grant you must make your claim on or before 13 July 2020. We have contacted all of our clients who we believe are eligible to make the first claim, these same clients will be eligible to make the second and final claim.

The online service for the second and final grant is not available yet. We will update this guidance to let you know when you can make your claim.
 Links

Check if you can claim a grant through the Self-Employment Income Support Scheme
Check if you are Eligible to claim


Original post 17th April 2020 1pm:

The self-employed income support scheme (SEISS) was announced on 26 March, and now we have more details of how this scheme will work in practice.

Who gets what?

It is difficult for HMRC to determine how much self-employed individuals earn in real time, in order to replace their lost income with government support. If MTD for income tax had already been in place, reporting self-employed income on a quarterly basis, the calculation of the support needed for each person may have been much easier.

The government has therefore chosen to base the amount of grant for each taxpayer on the average of their trading profits as reported in their last three tax returns for the years: 2015/16 to 2018/19. If the taxpayer started trading within this three year period the monthly average of profits will be calculated from the periods in which they were trading.

The taxpayer (or their tax agent) does not need to provide any figures at this stage. HMRC will arrive at the taxpayer’s average earnings by totalling up the reported profit for the three tax years (or shorter period as applicable) and divide by three to arrive at a typical average year. One quarter of that average annual profit will then form the basis of the SEISS grant awarded – at the 80% rate.

The number of months covered by a SEISS grant may be extended beyond three months if the coronavirus shutdown continues beyond the end of June.  

Who doesn’t qualify?

The SEISS grant will not be payable to anyone who meets any of these conditions:

  • has average annual profits of £50,000 or more – those taxpayers will get nothing
  • has not submitted a tax return for 2018/19
  • receive less than half of their annual taxable income from self-employed profits
  • has already ceased trading permanently.

If the taxpayer has not submitted their 2018/19 tax return, they have until 23 April 2020 to submit it in order to qualify for the grant. Penalties for late filing and late payment of tax will apply as normal. 

Those who started trading on or after 6 April 2019 are not eligible for the SEISS grant. This seems harsh, but HMRC has to draw the line somewhere.

The purpose of the SEISS grant is to help traders through the coronavirus crisis. To qualify for the grant the business must have traded in 2019/20 and would still be trading if it hadn’t been for the interruption to business due to the coronavirus. If the trader has taken the decision to cease trading completely, no grant is payable.   

Property letting businesses are not regarded as a trade, so landlords will not qualify for the SEISS grant even if more than half of their taxable income is from rental income.

Similarly, the letting of furnished holiday accommodation is not strictly a trade, although it is treated as a trade for certain pensions and CGT purposes. HMRC are unlikely to consider income from furnished holiday lets as qualifying for the SEISS grant, although these landlords will be among the hardest hit of all “self-employed”.    

How will the grant be delivered?

HMRC will contact those taxpayers who are eligible for this grant and will invite them to apply for the payment online. It is not clear if this contact will be made by letter, but it certainly won’t be by email or text message.

HMRC warns taxpayers not to be taken in by scammers who email, text, or call, offering money from HMRC then ask for the business bank details to be confirmed. Warn clients not to click on a link in an email, or reply to a text, purporting to be from HMRC.

The taxpayer may need to confirm to HMRC that they were trading in 2019/20 and expect to continue to trade in 2020/21. Some indication of the business turnover for 2019/20 may have to be provided at that point.

When will the money arrive?

The SEISS grant for three months will be payable in one lump sum into the taxpayer’s bank account, but the money will not be available until early June.

The grant will be treated as taxable income, and will have to be reported on tax returns for 2020/21. Taxpayers in receipt of working tax credits or universal credit will have to treat the SEISS grant as part of their self-employed income for 2020/21.

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus (COVID-19).

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus (COVID-19).

GOV.UK Guidance
COVID-19: Claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme

DOWNLOAD full CGA Factsheet on Self Employment Income Support Scheme (last updated 30/03/20) HERE

CORONAVIRUS JOB RETENTION SCHEME (CJRS) – update for director shareholders

There has been uncertainty as to the position of director/shareholders claiming under the CJRS as their income is usually taken from their company as a combination of a low salary and dividends. In the news story published following the Chancellor’s statement on 26 March (regarding the Self-employed scheme) is a telling paragraph. It says:
 
Those who pay themselves a salary and dividends through their own company are not covered by the scheme (the Self-employed Scheme) but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

This infers that directors will only be eligible for the CJRS based on their salary alone, and only if there is a proven PAYE record.

Further details of the CJRS are due to be published imminently and will be added to our newsfeed as soon as they are available.

Other useful commentary – Who wins and who loses in the Self-Employed Income Support scheme?

COVID-19: Top-up to local business grant funds scheme

A discretionary fund has been set up to accommodate certain small businesses previously outside the scope of the business grant funds scheme.  (Published 02/05/2020)

The statement from Gov.uk says:

This additional fund is aimed at small businesses with ongoing fixed property-related costs. We are asking local authorities to prioritise businesses in shared spaces, regular market traders, small charity properties that would meet the criteria for Small Business Rates Relief, and bed and breakfasts that pay council tax rather than business rates. But local authorities may choose to make payments to other businesses based on local economic need. The allocation of funding will be at the discretion of local authorities.

Read the full publication on GOV.UK

The top-up fund supports small and micro business and charities that are not eligible for other grants schemes.  This will include many businesses that were excluded from the Business Rates Claims, provided that you can demonstrate the need for the business to support fixed property costs.

York Council opened their applications page on Monday 1st June
Selby District Council opened their applications yesterday (3rd June)

Links

York Council Guidance
Selby Council Guidance 
Local Authority Discretionary Grant Fund – Guidance for local authorities

COVID-19: Coronavirus Bounce Back Loan

Five weeks after lockdown, the UK government has announced yet more financial support for small and medium-sized enterprises (SMEs) – this time in the form of emergency “Bounce Back” loans.

The Government has said that they will provide full details of the scheme on Monday 4 May.

Under the Bounce Back loan scheme, the Government announced that the smallest tier of companies in the UK economy will be able to borrow between £2,000 and £50,000 – capped at 25% of a business’s turnover, which would be a maximum of £200,000. The loan would be 100% guaranteed for lenders, by the Government

Chancellor of the Exchequer Rishi Sunak said the new funding, announced on 27 April, is designed to provide emergency aid for “the smallest businesses” which make up the backbone of the economy and which might not have been eligible for other financial support.

The Bounce Back loans are separate to the previously announced Coronavirus Business Interruption Loan Scheme (CBILS), which allows SMEs to apply for larger amounts, up to £5 million, and which is backed by an 80% government guarantee. The Bounce Back loans should be quicker to access, with a promise from the Chancellor that the money should be delivered to companies 24 hours after application approval.

When more details about the Bounce Back loan scheme are released, we will publish an update on our site. It’s also important to keep checking the government’s website. 

Am I eligible?

Sole traders, entrepreneurs and small businesses can apply. If your business meets all the following criteria you may be eligible for a loan:

  • Based in the UK.
  • Struggling due to coronavirus.
  • Trading as of 1 March.
  • Was not classed as an “undertaking in difficulty” as of 31 December 2019. Certain companies cannot apply, like banks, insurers and reinsurers (excluding insurance brokers), public sector bodies and state-funded primary and secondary schools.

What will be the application process?

  • Companies can apply through a short online form.
  • Sunak has promised “no complex eligibility criteria”. The online form will contain minimal checks, with no need for a credit check or an investigation to ensure the company is financially viable. There is also no requirement for a business plan.
  • Some fraud checks may still apply.
  • If the application is approved, the funds should be in the company’s account within 24 hours.
  • The loan will be delivered from the British Business Bank via a network of at least 50 accredited lenders.

What are the terms of the loan?

  • The loans are interest-free for the first 12 months, and no repayments are due within this period.
  • They are 100% backed by the government, whereas the CBILS loans are 80% government-backed.
  • There are no arrangement fees or early repayment charges.
  • The maximum term of the loan is six years.
  • The government is negotiating with lenders to ensure a low and standardised rate of interest for the duration of the loan.

What if I’ve already received a CBILS loan?

You cannot apply to both the CBILS and the Bounce Back schemes.

However, if your company has received a CBILS loan of up to £50,000 this might be able to be converted into a Bounce Back loan. You can apply to do this with your lender until 4 November 2020.

Similarly, if you receive a Bounce Back loan you may be able to apply to convert it to a CBILS loan if you require more aid, though this has still to be clarified.

At this moment in time there is very little information about which lenders will offer this scheme – below are a couple of links we located today.  The British Bank Link currently shows page not found (it disappeared during the writing of this article) however I have left the link in on the assumption it is being updated.

Barclays
NatWest
Starling
British Business Bank

[DOWNLOAD] COVID-19: Coronavirus Job Retention Scheme and Furlough Letter Template

HMRC Guidance can be found here.

The guidance was updated on the 15th April with new eligibility dates, bringing in some previously excluded employees that began work prior to the 19th March. While the claim includes employer pensions and employers national insurance, don’t forget that the new Employment Allowance kicks in and is likely to cover Employers National insurance in the first instance.

Where CGA prepares payroll on your behalf

We will be making this claim on your behalf and other than ensuring that we have information in respect of your payroll (including copies of any furlough letters issued to staff) as soon as possible. This month’s payroll will be very complicated and time-consuming, please do your best to help us help you.

Where CGA does not prepare payroll on your behalf

The Government have created a step by step guide for employers, as well as information on how to work out 80% of your employee’s wages.

If you have furloughed staff or yourself as a Director then don’t forget the following:

You will need to formally furlough staff/Directors and the company will need to write to confirm this, please see an example letter at the bottom of this page.

The furlough can be back-dated to the date when the employee/director ceased to undertake any work for the company (but not before 1st March 2020).  The furlough period must be a minimum of 3 weeks.

If you are a Director there will also need to be a formal minute, so that there is also a record in the company statutory books.  Where we carry out your company secretarial services we can prepare this document for you if you let us have a copy of your furlough letter.

The furlough scheme requires no work to be undertaken for the company, as a Director there are some statutory duties which can be undertaken but we don’t have any real guidance as to what this covers.  Some discussions amongst professionals have mentioned that the statutory duties of running the company do not constitute work and so filing accounts/confirmation statements and maintaining company assets are not work for this matter. However, looking at a sales quote/production rotas/dealing with payments/payroll etc would.

FURLOUGH LETTERS

Below is a possible Draft Furlough letter – this should include guidance from a qualified HR Lawyer and should be prepared in conjunction with your staff contracts.

PLEASE NOTE: THIS IS AN EXAMPLE ONLY AND SHOULD NOT BE RELIED UPON UNTIL YOU HAVE CONFIRMED CONTENTS WITH YOUR LAWYERS AND / OR HR SPECIALISTS

An employee furlough refers to a temporary leave or modification of normal working hours for a specific amount of time. It’s a leave of absence given to an employee with the promise that they will still have their job once the leave is over.

There are numerous reasons why employers implement a furlough employee policy, such as plant shutdowns, seasonal work, company reorganizations and reduced demand due to COVID-19.

Don’t rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first.

If you decide that putting employees on furlough is the best option for you and your employees, then you need to prepare a notification letter. Your furlough notice letter should contain the following:

  • Address – This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address.
  • Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance.
  • Detail – Explain what a furlough is, determine the length of the furlough, and communicate employee benefits during this period to employees.
  • Future communication – Offer a way for the employee to keep in touch. End the letter on a positive note.

EXAMPLE TEXT [NOTE: RUN THIS PAST YOUR LAWYER OR HR SPECIALIST]:

DOWNLOAD WORD DOCUMENT TEMPLATE HERE

or DOWNLOAD Updated Advice from Bridge HR (30/03/20) HERE

[Send to employee’s address or email. Note you should discuss and record employee agreement to be Furloughed before you send this letter. See Knights Plc comments on Furloughing employees.]

Dear [Employee name],

NI NUMBER AND / OR PAYROLL NUMBER

The purpose of this letter is to formally notify you that your position as [INSERT] on the [XXX DEPARTMENT] is being closed temporarily due to the downturn in business as a result of the COVID-19 Pandemic.

Your last official day of work will be [1 March / 1 April INSERT DAY]. Your salary and benefits will continue at their current level [or 80% insert as applicable] during the Furlough period. Please understand this action in no way reflects dissatisfaction with your job performance.

The length of this furlough is [insert future date or unknown currently].

We will provide regular information as the current Pandemic unfolds and when we return to normal working routines.

A Furlough is a short-term paid temporary leave of absence at full / 80% [AS APPLICABLE] of current salary. The furlough period and provisions may be changed or terminated at the sole discretion of the Company, and does not create any employment contract, express or implied.

During the furlough period, your pension and other benefits will continue [IF APPLICABLE].

Thank you for your contributions to the business and if I can help in any way, please contact me.

Yours Sincerely,

[insert signature]

COVID-19: Tax Reliefs to Support Homeworking

Homeworking allowance

The homeworking allowance was increased at the Spring Budget from £4 to £6 a week (or £26 a month) with effect from 6 April 2020. An employer can pay this fixed sum, tax-free and NIC-free, to meet the additional costs an employee incurs working at home under homeworking arrangements.

Homeworking arrangements mean an agreement between the employer and employee (ideally in writing) under which the employee works at home regularly as part of their job, not just informally at weekends or evenings.

During the coronavirus pandemic, HMRC will accept that employees working from home because their employer’s offices have closed – or because the employee is following advice to self-isolate – meet these requirements. Newly home-based employees will be eligible to receive the allowance tax free from the date that their employer agreed they could work from home, or from when government advice was announced.

An employer can pay more than £6 a week, provided there is evidence to support the additional costs incurred. Otherwise any excess will be subject to income tax and NIC. The alternative of an employer agreeing a bespoke scale rate with HMRC is currently improbable.

Additional costs which can be reimbursed include the increased cost of heat, light, insurance, water and telephone or broadband, but not fixed costs such as mortgage interest, rent or water rates.

To be reimbursed tax-free, the employee’s costs must have increased as a result of home working. For example, an employee who is already paying for broadband cannot claim reimbursement for their internet costs simply because they are now working from home. But if they didn’t previously have internet access and now require it, that will be an additional cost.

Homeworking relief

Where an employer is unable or unwilling to pay the homeworking allowance – or to reimburse in full the employee’s extra costs – can the employee get tax relief for the costs of homeworking?

While there is a specific provision for the homeworking allowance, tax relief for homeworking costs is only available under the much stricter general provisions  – costs must be incurred wholly, exclusively and necessarily for the employee’s work.

HMRC will accept that these conditions are met if the employee’s home is a workplace. To be a workplace, the employee’s homeworking must meet four criteria, including that there is no place for them to work at their employers premises and that the employee wasn’t able to choose between working at home or in the office at any time during their contract.

Given the current situation, it is likely that HMRC will accept that an employee can’t work from their employer’s premises, but we haven’t seen definitive confirmation that HMRC will accept that the further condition of lack of choice over working arrangements has been met.

If the four conditions are met, the employee can claim relief for household expenses including:

  • Heating and light for the working area
  • Metered cost of water used in the performance of duties
  • Unit costs of telephone calls

Where a claim is possible, an employee can either keep records and claim relief for their actual costs or claim a fixed amount of £6 a week or £26 a month (£4 a week or £18 a month prior to 6 April 2020) – with an additional claim for the cost of business calls on top.

An employee can make a claim online, by phone, by post or, if they are registered for self-assessment, through their tax return. HMRC has a handy tool to help guide employees to the best approach for them. 

Read the Government guidance here

COVID-19: Support for businesses that pay business rates

Support for businesses that pay business rates

We will introduce a business rates retail holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.

Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March

Support for businesses that pay little or no business rates

The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.

If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.

Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.

GOV.UK Guidance
COVID-19: support for businesses that pay rates

Guidance has been updated – Version 3 published with updates on State Aid, monitoring and reporting requirements, new annexes on state aid, Spotlight, and post payment checks, clarification of eligibility of charities.

In addition Annex E now gives guidance to local authorities in respect of the information that they may need to collect from businesses in order to make payment of the grant. 

GOV.UK Guidance
COVID-19: guidance on business support grant fundin
g

Some councils have already begun to request this information or have included a downloadable form on their website to collate this information

This includes the City of York Council and Hambleton District Council

A bit more info from CGA

CGA have been in touch with both Selby District Council and City of York Council on a daily basis to ask various questions in respect of the above, including clarification in respect of qualifying businesses, we are currently working through our database to categorise clients.

Around 700,000 businesses in England currently eligible for Small Business Rate Relief (SBBR) or Rural Rate Relief can apply for the emergency funding.

The Department for Business, Energy & Industrial Strategy will be writing to local authorities this week to outline the scheme, and encourage local authorities to prepare.

However, once up-and-running, your local authority will contact you rather than having to apply yourself.

And funding will not be available until April, as stated on the government website.

This additional funding for local authorities who collect business rates is part of a package of fiscal measures to help small business survive the coronavirus pandemic.

The coronavirus grant only applies to small business in England. Business rates in Scotland, Wales and Northern Ireland are set by their devolved administrations.

Finally, it is definitely worth checking that your business is correctly rated, having discussed the new retail discounts with one particular client, who didn’t think they qualified as being within the retail sector, we were able to advise to contrary and not only will they now benefit from the discounts for 20/21 but they should also receive a refund for the current year – this is worth approx. £26,000

Relevant Links

GOV.UK Guidance COVID-19: Support for businesses that pay rates
GOV.UK Guidance COVID-19: Support for businesses that pay little or no business rates
GOV.UK Coronavirus (COVID-19): Guidance on business support grant funding

Selby District Council – Business Rates
Selby District Council Expanded Retail Discount
City of York Council – Business Rates
Harrogate District Council – Business Rates
Hambleton District Council – Business Rates
Ryedale District Council – Business Rates

COVID-19: Support for businesses paying tax

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

GOV.UK Guidance
COVID-19: Support for businesses paying tax

Coronavirus VAT deferment: Get the details right

Many UK businesses are at risk of losing out on the coronavirus three month VAT deferment if they do not act immediately.

After announcing the easement on 20 March, HMRC followed up with a Q&A warning direct debit payers that they must contact their banks to cancel the facility or the VAT will automatically be withdrawn in the next few days.

Other details remain confusing, including repayment dates and payments on account. Taxpayers who use mini one-stop shop returns (MOSS) are not included in the scheme.

£30bn VAT payments suspended till 30 June 2020

On 20 March, the new Chancellor, Rishi Sunak, announced a three month VAT payment deferment lasting until 30 June 2020. This amounts to a £30bn credit line for over two million businesses. The tax holiday will be automatic – see direct debit payer risk below – although businesses may still go ahead and pay now if they wish. Taxpayers do not have to notify HMRC if they intend to take advantage of the payment holiday.

Any VAT due will be payable by the end of the 2020/21 financial year, which is 31 March 2021. This is the date for monthly VAT payers. However, the position is more complex for most VAT-registered businesses that are on quarterly staggers.

HMRC has yet to confirm their position. But the likely payments dates will be, depending on return due dates: 31 March 2021; 30 April 2021; or 31 May 2020.

There will be no interest or default surcharges due on deferred VAT. VAT credits and refund will be paid as normal during the period.

VAT returns still due; MTD phase 2 kicks in

Importantly, VAT returns must still go in on time by the 7th of the relevant month.

As HMRC has not postponed the launch of the new Making Tax Digital for VAT phase two, so all businesses above the VAT registration threshold are obliged to introduce digital bookkeeping and the full digital journey.

The latter means no manual adjustments to data, consolidating in spreadsheets, or using ‘cut and paste’. The regular VAT penalty regime for missing any MTD obligations also comes into play on 1 April 2020 when the one-year soft-landing phase of MTD ends.

Direct debit payers at risk

One major glitch in the plan is taxpayers on direct debit. HMRC will automatically withdraw the VAT declared in the VAT return. They cannot stop this process. So any direct debit payer must contact their bank immediately to cancel the payment.

Mixed messages for some VAT payers

After initial confusion, foreign businesses with a UK VAT registration have been confirmed as eligible for the VAT deferral. However, any businesses filing for B2C electronic services sales have been excluded. They will have to pay the VAT due as normal. There are no details yet on payment-on-account payers. But we assume there will be a postponement, too?

What happens after June?

Given the deepening economic gravity of the COVID-19 situation, it is entirely possible that there will be an extension in July to this VAT deferment. So direct debit payers should pause before reinstating their payments. And we should all keep tuned.

COVID-19: A Checklist for Businesses Affected by COVID-19

A Checklist for Businesses Affected by COVID-19 – key actions to take and contingency plans to make

These urgent actions apply to businesses and companies regardless of size.

This is the guidance we are giving to the many businesses we are advising, many of whom are now working from home and wondering where to start.

Last week’s announcement from the Chancellor set out a raft of measures to assist businesses which could make a vast difference to many businesses. Some of the detail which will enable you to access these packages is still to follow. There are, however, a number of actions that businesses can undertake to prepare for speedy applications and to prioritise what is most time-critical.

As you would expect, banks and HMRC are being very supportive of the businesses we are advising through these very challenging times.  There are two key points that may influence the checklist below:

  • A ‘Business Plan’ for recovery and repayment will put you on the front foot – you should be ready to talk through this plan with lenders and creditors
  • Be mindful of any director, personal or family member guarantees that already exist for loans. New guarantees may be required for any government-backed loan schemes

You should be considering the following:

  • Coronavirus job retention scheme for those businesses who have concerns around staff
  • Remote working/Early Holidays/Short Time Working/Sick pay/SSP/Travel Policies/Health and Safety Policies/Redundancies
  • Maintain an open dialogue with Customers, Suppliers, Contractors and Trading Partners
  • Time to Pay: Defer VAT/PAYE/NIC/CIS/MGD payments for pre-agreed periods
  • Defer Rates Payments where you are able to
  • Where applicable, claim new business rates reliefs
  • Maintain an open dialogue with landlords – agree Rent
  • Prepare updated Bank Facilities including Capital Holidays
  • Coronavirus Business Interruption Loan Scheme – with effect 23rd March. These are loans, not grants – a business plan which details your ability to repay this will be essential.
  • Defer Capital Expenditure
  • Apply for a reprieve on finance repayments in respect of Hire Purchases of Leasing – three to six months or more if you can
  • Improve and accelerate Income
    • Credit Control is of tantamount importance
    • Reduce the amount of stock you carry
    • Review your insurance policies
    • Review your contracts and advance orders
    • Review your routes to market
    • Review and where possible revise you T&C’s

There are many practical steps which businesses will be able to take either themselves or with their professional advisers.

CGA can be contacted at any time for advice and support.


UPDATED (31/03/2020) for the announcement made by Alok Sharma 28/03/2020 – information provided by Redman Nichols Butler

On Saturday, 28 March 2020 at the No 10, Downing Street daily Covid – 19 Health Crisis media briefing, Alok Sharma, Secretary of State for Business, Energy and Industrial Strategy, announced that the Government will bring into law in “the coming weeks” changes to the UK insolvency laws to help struggling British businesses stay afloat and give them “greater flexibility” during the coronavirus pandemic and emerge intact the other side of it.

He said that the measures will give firms extra time and space to weather the storm and be ready to get back to normal when the crisis ends whilst ensuring creditors get the best return possible in the circumstances.  He also said that that the changes will allow companies undergoing restructuring to continue access to supplies and raw materials to carry out their activities.

Mr Sharma also announced that there would be a temporary suspension of the wrongful trading provisions “for three months” to be applied retrospectively from March 1 2020 for company directors to remove the threat of personal liability during the pandemic, but he was keen to emphasise that all of the other checks and balances that help to ensure directors fulfil their duties properly will remain in force.

The Insolvency Service have, over the weekend, issued further information on the Government’s proposed changes.  They include:-

  • A moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure.
  • Protection of their supplies to enable them to continue trading during the moratorium.
  • A new restructuring plan or procedure, binding creditors to that plan.

As soon as we have more information, we shall let you know.  

Redman Nichols Butler

www.redmannicholsbutler.co.uk